Back to the Future as wages are predicted to stay in the past

In spite of political insistence that the economy is recovering, and has been for a good while, this week the BBC’s Economics Editor has predicted that wages are likely to stagnate for a good while longer.

That conclusion isn’t really a surprise, but it will be a disappointment for many given the extent to which pay has been eroded over recent years – this report from 3 years ago pointing out that real-terms pay is stuck in a time loop at 2004.

The gender pay gap for full-time employees was 9.4% (the gap has hardly changed over the last six years).

Indeed, if you look at the cumulative impacts of pay restraint under successive Governments, the 2008 economic crisis and the seemingly never ending austerity that has followed, some public sector workers may only have seen a real terms pay increase in their lifetime if they have managed to get a promotion – and many have only done so because inflation was so low in 2014/15:

…and that’s before you get into the debate about whether CPI, currently 2.6%, is a reasonable measure of the increased cost of living (most trade unions and many commentators prefer to use RPI, currently sitting at 3.5%, as it includes housing costs).

I’d be interested to know your thoughts on this subject, so please leave a comment, but if you’d like to discuss this topic more directly please contact me at malcolm@strathesk.co.uk or give me a call on 07736068787